Crypto investment products get approved by UK FCA, yet a hitch emerges.

The United Kingdom’s main financial regulator, the Financial Conduct Authority (FCA), has announced that it will ease the listing of crypto investment products, a move that has been welcomed by figures in the crypto industry. The FCA will allow professional investors to trade crypto exchange-traded notes (ETNs) created by recognized investment exchanges (RIEs). However, retail investors will still be prohibited from participating, limiting the impact of the FCA’s announcement on broader crypto adoption. In Europe, regulations prevent the offering of exchange-traded funds (ETFs) for individual assets like Bitcoin (BTC) or Ether (ETH), making ETNs the preferred exchange-traded product (ETP) in the European Union and the UK. With the FCA’s approval, traditional financial institutions and UK traders may soon have easier access to crypto-related financial products. However, the conditions attached to the approval highlight the limitations of the announcement. While the decision is a step forward in integrating crypto-related products into a regulated environment, it also underscores the hesitancy of the UK to embrace retail investors’ growing interest in crypto assets. Some industry insiders have praised the move but emphasized the need for greater accessibility and inclusion in UK markets. They argue that to achieve its ambition of becoming a global hub for the crypto industry, the UK should do more to broaden participation. The FCA has historically maintained a cautious stance towards the crypto industry, citing reasons such as the lack of reliable valuation for underlying assets, prevalence of market abuse and financial crime, extreme price volatility, inadequate understanding by retail consumers, and a lack of legitimate investment need. Despite the upward price trajectory of Bitcoin and Ether since the FCA’s decision to exclude retail investors from crypto-derivatives, the ban remains in place due to significant harms in the crypto market. While the FCA has indicated that it will review its position on crypto ETNs, it remains to be seen whether any changes will be made in the near future. Industry insiders hope that meaningful change will be implemented quickly. The process of approving spot Bitcoin ETFs in the United States was much more complex, requiring significant industry, legal, and political pressure. The path to a UK ETN appears to be less challenging, but efforts should be made to ensure greater accessibility. The FCA’s cautious stance, while well-intentioned, may have unintended consequences, driving investors towards unregulated exchanges and increasing their vulnerability. Comprehensive regulations that allow safe exposure to crypto assets are seen as a better approach to protecting investors. Collaboration between the public and private sectors, as well as domestic and global policymakers, is needed to address the challenges and opportunities in the crypto industry. Overall, the FCA’s policy towards crypto remains a work in progress.